Demand and Supply Curves: Rotations Versus Shifts

7 Pages Posted: 29 Apr 2003

See all articles by Philip E. Graves

Philip E. Graves

University of Colorado at Boulder - Department of Economics

Robert L. Sexton

Pepperdine University - Economics Department

Date Written: March 2003

Abstract

The observations we makes are fairly simple, although many teachers of economics may be unfamiliar with them: 1) If the demand relationship is assumed to be "constant elasticity" (the double logarithm specification), a change in a demand-shifting variable (e.g. income) will result in a rotation of the demand curve and not a parallel shift, while 2) If the demand relationship is assumed to be linear in its arguments, a change in a demand-shifting variable will result in a parallel shift in the demand curve. The clarification is of interest, in part, because virtually all graphs in principles, intermediate microeconomics, and other textbooks in the various field areas are drawn as parallel shifts, implicitly assuming a linear relation.

JEL Classification: A2

Suggested Citation

Graves, Philip E. and Sexton, Robert L., Demand and Supply Curves: Rotations Versus Shifts (March 2003). Available at SSRN: https://ssrn.com/abstract=391362

Philip E. Graves

University of Colorado at Boulder - Department of Economics ( email )

Campus Box 256
Boulder, CO 80309-0256
United States

Robert L. Sexton (Contact Author)

Pepperdine University - Economics Department ( email )

24255 Pacific Coast Highway
Malibu, CA 90263
United States

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